Bella bought 19 homes, then the market halved Interesting article about a REA that had a strategy that assumed 1. Real estate would always hold its value (ie $920K in 2011 now worth $230K) 2. Buying up the town (!!) was a lucrative issue since mining companies were subsidising / paying rent 3. Mining companies would tolerate exhorbitant rents No better example of putting all your eggs into a single basket. Diversification into other regions would have insulated this issue but I suspect the greed motivator of mining companies being held hostage to inflated rents was a strong factor in the strategy. IDK but its like being Gina Rheinhart and buying up a massive area of land for mining and then saying she cant accept a change in the price of ore. Lang Hancock had this issue, now Gina and Twiggy and even Palmer. Miners accept that...I dont think anyone will feel for the local REA who also help prop up demand. The people I feel for are the miners. Many purchased homes - Say $920K and they are now worth $230K. And if they lost their job and were forced to move towns and add their property to the swelling rental list then s118-192 applies to them. Its the "first used to produce income rule" associated with a former main residence and its wrong that its not a option. The poor miner may end up having to pay CGT on the change in value from the present $230K all the way back to $920K - The price they paid originally. CGT of perhaps $170,000 for a property still worth what they paid for it. Doesnt seem right. s118-192 needs to be a choice not a compulsory rule. The REA isnt affected by it but a redundant miner forced to move towns is.
Bit of tax planning could assist. Sell to a discretionary trust for market value being 230k incurring a capital loss in their own name. Any increases in capital value then able to be distributed back to the individual to use up the capital losses on transfer.
Why should they be forced to incur duty, legals etc ? Changing the law so taxpayers may elect to apply s118-192 seems more relevant. I havent seen a potential for abuse if that was permitted. Only individuals are affected.
